Current Economic Statistics and Review For the Week 
Ended April 15, 2006 (15^th Weekly Report of 2006)

Theme of the week:

Corporate Sector Performance During 2005-06: A Summary 

Display of Overall Buoyancy Despite Impediments **

1.  Introduction

The corporate sector has maintained its growth momentum in 2005-06 despite facing several problems such as ONGC witnessing a major fire break out in July 2005 which destroyed its offshore platform at Bombay High and which was one of the reasons for a slowdown in the mining sector. Heavy rains witnessed in Mumbai and Gujarat resulted in loss of production as a lot of plants were shutdown due to water-logging; ports were also affected. Rise in international crude oil prices has taken toll not only in the performance of oil companies but also that of other companies due to rising cost. Hardening interest rates have also affected companies due to rising borrowing costs. Despite these problems, the overall buoyancy has been witnessed in the corporate sector performance during 2005-06.

There is also reason to believe that the improved corporate performance during 2004-05 and 2005-06 appears to initiate a trend arising from the dynamism that the entrepreneurs have begun to exhibit as a result of accepting the challenges of competition in a liberalised and open economy. Simultaneously the corporate sector has also benefited from a conducive policy environment; reduction in tax rates and interest rates are the set of other such policies.

2.  Indicators of Growth

           The Indian economy seems to have entered a new phase of cyclical upswing with robust performances by the manufacturing and services sectors boosting the overall GDP growth. Some of the major indicators of growth are discussed below.

Overall

The Central Statistical Organisation’s advance estimates peg GDP growth for the Indian economy at 8.1 per cent (at 1999-2000 prices) for 2005-06 as compared to 7.5 per cent in 2004-05 and 8.5 per cent in 2003-04.  The growth rate of manufacturing is expected to be around 9.4 per cent in 2005-06 as per the above estimates as against 8.1 per cent in 2004-05 and 7.1 in 2003-04. The rate of growth of industrial sector as measured in terms of IIP (Index of industrial production) has stood at 8 per cent during April-January 2005-06 with manufacturing growing by 9 per cent, which is marginally lower than 9.1 per cent attained a year ago. This growth trend has been reflected in manufacturing companies who have reported substantial growth in sales, profitability and other financial indicators. However, within manufacturing, performance varied across the various sectors.

Investment

According to CMIE’s 44^th survey of investments, during the quarter ended January 2006, 10,177 projects involving an investment of Rs 27.61 lakh crore have been captured. Keeping with the trend of increasing new investments 2,087 projects envisaging an investment of Rs 8.37 lakh crore have announced during April 2005-January 2006. During the January 2006 quarter alone, 557 projects envisaging Rs 3.05 lakh crore have been announced, this has been higher than the Rs 2.10 lakh crore new investments announced during the previous quarter and by-far the highest new investments since CMIE started undertaking such surveys in 1996. As per the survey carried out by CMIE, total investments comprising of announcement, proposed and under implementation together has shown a remarkable growth of 30.8 per cent year-on-year in January 2006. The total number of deleted projects has gone down to 168 in January 2006 from 238 in January 2005. The projects under implementation have increased by 10 per cent to Rs 8,74,933 crore in January 2006.

            The highest investments have been made by Mukesh Ambani controlled Reliance Industries. Two mega SEZ (special economic zones) projects have been announced at Jamnagar and Haryana involving an investment of Rs 27,000 crore and Rs 25,000 crore, respectively by the company. The largest single investment has been made by JSW Steel for their 10 million TPA (tonne per annum) steel plant. In the electricity generation sector, Power Finance Corporation has announced four Ultra Mega Power projects located at Maharashtra , Madhya Pradesh, Karnataka and Chhattisgarh with a capacity of 4000-mega watt each involving an investment of Rs 15,000 crore per project. In the communication sector, Bharat Sanchar Nigam has announced its Rs 19,400 crore mobile and broadband service project.

Manufacturing sector has witnessed a whooping 87 per cent increase in investment in January 2006 over the same period a year ago. The share of manufacturing in the total industry has been the highest at 30.11 per cent in January 2006 as against 23.29 per cent in January 2005. Under manufacturing, metal and metal products have secured a substantial amount of investment. If we take a closer look at Table 2 we find that the spread of investment has been selective. Other than in manufacturing, the sectoral shares have gone down: services to 27.31 per cent in January 2006 as against 31.17 per cent over the same period previous year, electricity to 28.68 per cent from 30.02 per cent and irrigation to 4.96 per cent from 6.80 per cent. However, the share of construction industry and mining has marginally risen to 4.97 per cent and 3.97 from 4.77 per cent and 3.96 per cent, respectively.  

However, the picture of actual investments has not been as rosy as that of the proposals made (Table 3).

Credit offtake

           Bank credit disbursal during 2004-05 has been well diversified across different sectors of the economy, with flows to housing and retail sector particularly strong and a substantial pick up in flows to agriculture. Strong industrial recovery has been accompanied by much higher credit growth of 17.4 per cent to industry (medium and large) in 2004-05 compared to only 5.1 per cent in the previous year. During 2005-06, up to end of October 2005, the year-on-year growth of credit to industry accelerated further to 45.7 per cent. The share of industry in gross bank credit saw a decline from 32.3 per cent during 2003-04 to 29.8 per cent during 2004-05. However, this declining trend has been reversed during the current year up to October 2005, with the share increasing to 33.2 per cent from 31.7 per cent during the corresponding period of the previous year.

 Sources of Finance

           In addition to bank credit mentioned above and substantial increases in cash flows of corporate, on their own, the reliance of corporate sectors on overseas borrowings has increased sharply during 2005-06. The corporate sector has borrowed $ 13.7 billion during April-February 2005-06 as against $ 11.5 billion over the same period previous year. Initially banks, financial institutions have been the major sources for funding of domestic companies. But, now a days, the corporate are raising money largely from overseas market through ECB’s and FCCB’s.

3.  Quarterly Performance: A Disaggregated Picture

           Insofar as corporate balance sheets are concerned, quarterly data are available up to the third quarter of 2005-06. Earlier, during 2004-05, the performance of corporate sector has been impressive. In each quarter, sales and profits had seen healthy year-on-year (y-o-y) growth. The performance of non-financial companies had outpaced financial companies by a wide margin both in income and profits. Surging exports and good domestic demand in 2004-05 had been among the major growth drivers of this performance. Manufacturing segment had maintained above 20 per cent sales growth throughout 2004-05. The growth of manufacturing sector companies was largely driven by metal companies, automobile, information technology and food beverages. According to RBI study, in 2004-05 the profit after tax grew by 53.8 per cent over 2003-04 and 59.5 per cent in 2003-04 over 2002-03.

During 2005-06, the overall picture of the corporate sector shows that the tempo of Indian economy integrating into the global economy is gathering momentum at a rapid pace manifested from the rise in outsourcing in the Information Technology (IT) and IT-based service sectors, growth in export-import trade and in global acquisitions, in addition, consumption demand for consumer is increasing which can be seen from the improvement in the performance of the fast moving consumer goods (FMCG) companies. Here in this section we have taken a quick review of the performance of the first three quarters of 2005-06.

              During the first quarter of 2005-06 corporates have continued with a sustained growth over the same period in 2004-05. In terms of profitability, the net profits have risen over 100 per cent in industries such as hotels, tractors, trading, chemicals, textile machinery, construction, electrical equipment, shipping, machine tools, packaging, petrochemicals, paper, diamond, mining, food products and sugar. The industries that did not do well in terms of profits are packaging, granites, engines, tyres, glass and lubricant. Small and medium companies like Indorama, Bajaj Hindustan, Varun Shipping, etc have scaled up their performance substantially.

The growth in sales of the manufacturing sector have been dominated by metal products, non-electrical machinery and electrical machinery. There has been very few manufacturing industries whose performance were down during April-June 2005, these include vanaspati, food processing fertilisers, castings, electronic equipment electronic tubes and print media.

The second quarter of 2005-06 received a setback due to heavy rainfall in almost all parts of the country thus affecting production. In addition, firming of interest rates and rising crude oil prices internationally has affected the performance of the corporate sector by rising their cost of production. In the month of July and September 2005 floods in Maharashtra and Gujarat unleashed heavy destruction. Various companies had to shutdown their plants due to water logging. The plants of Reliance Industries, Cadila Healthcare and Bombay Dying situated at Patalganga had shutdown for nearly a month. Heavy rains also left ports at Gujarat and Mumbai non functional for some period thus resulting in loss of consignments. Yet, the quarterly performance varied sector by sector. Results for companies in information technology, auto and capital goods exceeded expectations, whereas results for companies like cement, metals and pharmaceuticals have been below expectations. The sectors, which performed well in terms of sales have been sugar, engineering, banking (private) and paints. In terms of net profit growth, refineries, public sector banks, sugar, cement and steel showed poor performance. However, hotels, fertilisers, textiles and engineering companies have witnessed strong growth in net profits.

After receiving a setback in the second quarter, corporate sector performance bounced back in the third quarter. FMCG, auto, cement, capital goods and IT companies have continued with their growth momentum. Rising investments and higher demand from the housing sector ensured that the construction industry continued on its growth track. Under manufacturing, sector such as ferrous metals, chemicals cotton textiles have registered a subdued performance by reporting declining in profitability both at operating profits and net profit. Increasing subsidy burden and higher raw material expenses has led oil marketing and refining companies and steel companies to post miserable performance.

According to RBI (Reserve Bank of India) study as published in January 2006 Bulletin, non-government non-financial public limited companies (2,128 companies) have exhibited continued good performance in terms of high growth in sales and profits, along with sharp delaine in interest payments during the first half of 2005-06. The sales of selected companies have grown by 17.2 per cent (25.1 per cent in H1: 2004-05) and their profits after tax growth has stood at 41.3 per cent in H1: 2005-06 (50.1 per cent in H1 2004-05). The gross profit margin at 13.3 per cent and net profit margin at 8.7 per cent have been at a higher level than 12.3 per cent and 7.2 per cent, respectively in the corresponding period of the previous year.

Of the 2,128 companies covered in the study, 525 companies each with sales of Rs 100 crore or more have contributed 89.6 per cent to total sales. The number of companies reporting profits after tax in the first half of 2005-06 has been higher at 1,665 as compared with 1,581 such companies in the corresponding period of the previous year.

The key indicators of performance across the industries have shown considerable variations in their growth during the first half of 2005-06. The profits after tax of food products and beverages, textiles, electrical machinery and apparatus and hotel and restaurants have been more than doubled in the first half of 2005-06. More than 50 per cent increase in net profits has reported by mining and quarrying, paper and paper products except machinery and equipment, machinery and machine tools, medical precision, construction, wholesale and retail trade and transport. On the other hand, rubber and plastic products, electricity generation and supply have recorded decline in their gross and net profit margins

Sector-wise performance

           The overall sector-wise performance reveals that sectors like FMCG, automobile, capital goods, IT, cement and engineering have continued sustained growth whereas oil and gas, metal and metal products have reported subdued performance.

           Among the good performers, the FMCG sector has posted good results – a key beneficiary of satisfactory monsoon, as it fuels rural demand. The growth of HLL, GCPL, Marico has been mainly driven by their home and personal care products and food business. HLL after a gap of 6 years has been able to post double-digit growth in its sales revenue. FMCG growth (in value terms) in rural markets has far outpaced the sector’s growth in urban markets during the first nine months of the current financial year. Products that have seen significant growth in rural markets include toothpaste, hair oils and shampoos. The growth curve of India automobile companies have been on an upswing for the past few years. India is becoming the fastest growing car market. The automobile companies are expanding their horizons by acquiring land outside India and building manufacturing units, to reap benefits of economies of scales. Indian auto companies are moving aggressively into foreign markets. For example, M&M has opened an assembly line for its Bolero range pick-up vehicles in Uruguay; Tata Motors is gearing up to re-launch its best selling passenger car, Indica, in the United Kingdom under its own brand.

           With the easy availability of consumer finance, rising disposable income levels and changing family patterns the demand for consumer durables like air conditioners (AC), coolers, washing machines and refrigerators has been scaling up ultimately resulted in the strong financial performance by consumer durable companies.

            In the infrastructure segment, the cement industry is on a roll; riding on increased activity in real estate the consumption demand for cement has reported a substantial rise during 2005-06. Cement industry is mainly dominated by four giants namely, ACC, Ultra Tech, Gujarat Ambuja and Grasim, together they have produced 55.26 million tonne of cement during April-February 2005-06. Also, the engineering sector is the largest segment of the overall Indian industrial sector. India has a strong engineering and capital goods base. The important groups within the engineering industry include machinery & instruments, electronic goods, etc. The healthy growth continued on the back of healthy order book positions for companies like Thermax, Larsen and Toubro, Bharat Heavy Electricals Limited, etc and strong demand both in the domestic and the export markets. The capital goods sector has witnessed buoyant year with domestic order inflows showing no signs of easing. Profit margins have improved as new contracts have been executed and economies of scale are driving the growth. This is in consonance with the robust growth impulses exhibited by the capital goods sector in overall industries production.

Not withstanding with the above growth, oil and gas and metals and metal products have registered depressing performance. The financial performance of oil marketing and refining companies has decelerated in 2005-06. This reflects the adverse impact of higher crude oil prices in the international markets with no corresponding hike in prices of petroleum products in the domestic market. The prices of petrol and diesel have been revised in September 2005, but have not been sufficient to match the sharp increase in import prices. Also, LPG and SKO (superior kerosene oil) prices have not been revised which has resulted in increased subsidy, thus resulting in enhanced losses for integrated oil companies. The upward spiraling of prices of metal at the London Metal Exchange (LME) has continued, which has been reflected in the domestic market. As a result, the prices of alumina, zinc and copper have been raised by National Aluminium Company of India Limited, Hindalco and Hindustan Zinc. Steel sector, which has experienced high growth over the last two years, has witnessed a drastic fall in its profitability this year. The big steel companies like SAIL, Jindal Stainless, Essar Steel, Uttam Galva have suffered in profitability.

4.  Newer Areas of Dynamism

There has been a sharp rise in employment opportunities especially in the software companies. This is reflected in the rise in the labour productivity, efficiency of labour also. The rise in wage bill has not only been visible in software industry alone but also in automobile companies, pharmaceutical companies though automobile and pharma companies have not seen drastic rise in their workforce in the current year still they have witnessed a substantial rise in wage bill.

Indian companies are acquiring on a large scale lands to set up special economic zones (SEZ) or for building hospitals hotels, petrol pumps technology campus, etc. RIL has acquired land to set up two SEZ’s in Navi Munbai and Haryana. The Mahindra Group has signed an agreement with the Maharashtra government to develop a 3,000-acre special economic zone (SEZ) at Karla near Pune.

Corporate Restructuring

            Of late, Corporate restructuring is one strategy, which is being increasingly getting adopted by the corporates, especially in the old family owned firms. With the new divide and rule strategy it becomes easy for the corporates to expand and focus solely on their businesses. Recent demergers show that the corporates have adopted a strategy where separate listed companies have been created from one diversified company. The best example of this is the division of Dhirubhai Ambani’s Reliance Empire. The feud between the Ambani brothers and the de-merger announcement that followed had been the most significant corporate development the country has seen in many years. Mukesh Ambani continues to control the core petrochemical, refining and exploration business, which remain under the post-demerger with Reliance Industries, while Anil Ambani took over the control of telecom, financial services and the power utility business.

            Another landmark in corporate history is the merger of Indo Gulf Fertilisers Limited and Birla Global Finance Limited with Indian Rayon. The motive was to create a much larger, stronger entity in Indian Rayon. The name of Indian Rayon has changed to ‘Aditya Birla Nuvo’ after the merger. At a smaller level, some companies have tried to simply carve out their investment portfolios into separate companies. RPG group’s KEC International took out its investment portfolio into a new company. Post merger, there will be two sets of businesses - the brick and mortar businesses of fertilisers, carbon black, viscose filament yarn and textiles that will be the focused value segment and the high growth segment comprising garments, financial services, IT and IT-enabled services and telecom.

Mergers & Acquisition

            Mergers and acquisitions have gained importance in recent times. Business consolidation by large business houses and by multinationals operating in India , have increased competition amongst the domestic companies; it has encouraged mergers and acquisition activities in India . The value of M&A’s at $ 13 billion during January-November 2005 has crossed all-time high. The number of deals over this period has been 245 compared to 237 during the whole year of 2004. Overseas acquisitions by Indian companies have also gone up sharply in the current year. There have been 62 overseas deals till September 2005 worth $ 1.38 billion such as Tata Steel buys Thai company for $ 130 million, Uttam Galva steel buys US based Detroit steel and Dr Reddy’s buys Roche’s pharma business in Mexico for $ 59 billion. The spree of mergers and acquisitions witnessed by the corporate sector during 2005 follows into the current calendar year. While sectors like pharma and IT have continued consolidations through M&A activities, new sectors like aviation seen to be joining the bandwagon.

5. Prospects For 2006-07

The growth momentum in auto industry is expected to continue for the fourth quarter. The latest announcement by the Government to cut excise duty on small cars will soon see India emerging as the world's largest manufacturing hub for small or compact cars. India has now become an R&D hub for software. Information technology, telecom and hotel companies are expected to continue performing well in the ensuing quarters. The growth in the capital goods industries, an important indicator of improved infrastructure and capacity addition for the manufacturing sector, is likely to remain buoyant in the coming year. FMCG companies might hike prices of their products to increase margins. The price reduction strategy has not yielded any value gains for their brands. As the FMCG market is growing, many companies will cash in on the opportunities to improve their margins. Cement prices are rising in most parts of the country. In Mumbai prices of cement are at an all-time high. The supreme courts decision restricting trucks from overloading has also added to the hike in prices. In summer when infrastructure activities are at their peak the construction cost can also be hiked. However, there are possibilities of a rise in prime lending rates (PLR’s) of banks which may impinge on costs but unlikely to slowdown infrastructure and manufacturing growth.

References

Economic Survey (2005-06), Government of India

CMIE, (2006), Monthly Review of Indian Economy, March

CMIE, (2006), Captex, March

CMIE, (2006), Captex  February

Reserve Bank of India (2006), Monthly Bulletin, January

* This note is prepared by Vidya Kanitkar with inputs by Abhilasha Maheswari and Piyusha Hukeri

Highlights of  Current Economic Scene

AGRICULTURE

The central government has approved a proposal for the release of Rs 1,70 crore to provide interest relief on the crop loans to the farmers. The borrowers who had availed crop loans up to Rs 1 lakh each for kharif and rabi seasons during 2005-06 would be instantly benefited. However, where the crop loan amount exceeds Rs 1 lakh, the interest relief would be applicable on the principal amount up to Rs 1 lakh only.

A Group of Ministers (GoM) has been set up to completely overhaul the Price Stabilisaion Fund (PSF) for the plantation crops, while a committee has been set up to formulate an insurance package for the plantation farmers. The GoM would finalise the plan to revamp the PSF.

In the wake of natural disasters witnessed by Maharashtra state during 2005-06,the state government has planned to set up a special agriculture cell under its disaster management department. The state has suffered from natural calamities like heavy floods, unseasonal rains, hailstorms, etc., which has damaged the crops like cotton, mango onions, etc. The special cell would provide assistance in the restoration work.

Onion growers in Maharashtra who have sold their produce to Agricultural Produce Market Committees (APMCs) in state during February and March 2006 would be given a subsidy of Rs 50 per quintal. The decision would be applicable to onions sold in all APMCs in the state, except in Mumbai. The state government has also decided to provide incentives to onion exporters. For instance, transport subsidy of Rs 10,000 per container would be provided for export to non-European countries.

To aid the poultry industry affected by the bird flu, the Reserve Bank of India (RBI) has asked banks to convert principal and interest due on working capital loans to term loans, which would be applicable to installments and interest due for payment on or after February 01, 2006.

The mango processing units in Tamil Nadu and Andhra Pradesh, which produce most of the mango pulp for the international markets, are expected to suffer loss during 2006-07. The unfavourable weather conditions during the flowering season in December have delayed flowering, resulting in lower yield of fruits ultimately adversely affecting the production of mango pulp during this season.

The Andhra Pradesh Export Development Authority (APEDA) has planned to launch an Integrated Infrastructure Development Project (IIDP) to boost mango exports. The project would commence in three months and APEDA would work in co-ordination with the state government on the issue.

According to data compiled by the Solvent Extractors' Association of India total oilmeal exports have surged by a robust 64 per cent to 44.2 lakh tonnes in 2005-06, as against 26.9 lakh tonnes in 2004-05. However, rapeseedmeal export has slid due to non-availability of rapeseed for crushing in the last few months.

Vietnam has emerged as highest importer of oilmeal, followed by South Korea , Japan , China , and Indonesia . In terms of growth, exports to China jumped by 311 per cent in 2005-06 over the previous year followed by Japan (237 per cent) and Vietnam (102 per cent).

Foreign Trade Policy 2006 has taken various initiatives vis-à-vis farm sector and allied activities. Major among them includes - a new scheme called the Vishesh Krishi and Gram Udyog Yojana (Special Agricultural and Village Industry Scheme) for promoting export of fruits, vegetables, flowers, minor forest produce, dairy, poultry and their value added products and Gram Udyog products, has been introduced. Funds shall be earmarked under ASIDE (Assistance to States for Infrastructure Development of Exports) for development of Agri Export Zones (AEZ). Focusing on value-added items, the new Foreign Trade Policy (FTP) has announced an additional duty entitlement pass-book (DEPB) facility to the tune of 1.25 per cent for identified value added products like specified specialised inputs / chemicals and flavouring oils etc. Besides this the policy has also announced a concessional rate for import of monofilament long-line tuna fishing system and a self-removal procedure for clearance of seafood waste, to be applicable subject to prescribed wastage norms.

According to Tea Board of India, tea production, in the first two months of the calendar year 2006, has registered a growth of 3.7 per cent to touch 39.8 million kgs over a year ago. However, exports have suffered drastically during this period recording a decline of 38.2 per cent to stand at 21.9 million kgs. For the April-February 2005-06 period, as well tea exports have declined to 162.1 million kgs compared with 193.73 million kgs a year ago.

The central government is likely to reduce its wheat procurement target of 162 lakh tonnes in the rabi marketing season 2006-07due to unfavourable weather conditions.

INDUSTRY

Mining

For the Financial year 2005-06, the country’s mineral production (excluding atomic minerals) has been estimated to increase by 8.33 per cent in value terms at Rs 75,121.61 crore. The rise has been attributed to higher prices of minerals during the year. Of this, fuel minerals have accounted for Rs 56,412 crore (75 per cent), metallic minerals Rs 8,973 crore (12 per cent) and non-metallic minerals, including minor minerals, have been valued at Rs 9,736 crore (13 per cent). According to the 2005-06 annual report of the ministry of mines, based on the overall trend so far, the index of mineral production (base 1993-94 = 100) for the financial year 2005-06 is expected to be 154.23 as compared to 153.48 for 2004-05, showing marginal growth.

Automobiles

At present, 70,000 bikes are being sold in 125 cc segment as compared with 2.4 lakh bikes in the 100/110 cc in a month, translating to a market share of 18 per cent for 125 cc bikes of total motor cycle market. However, the trend is likely to reverse in the near future with the 125 cc variants of the executive segment (middle segment) bikes expected to outnumber their 100/110 cc counterparts in over one-and-a-half years. The key factors for this would be improved fuel economy from 125 cc bikes compared with their 100 cc counterparts, diminishing price differential between the two segments and more variety as a result of entry of new players. The 125 cc executive segment bikes are priced at Rs 44-49,000 compared with their 100 cc counterparts at Rs 41-43,000.

INFRASTRUCTURE

Power

The US Agency for International Development (USAID), in alliance with General Electricals (GE), has identified several villages in India for promoting rural electrification, using renewable energy technologies like biogas. The consortium has started conducting the feasibility analysis of a biogas plant in a remote village in Tamil Nadu, called Gandhigram. Some sites in Maharashtra and Karnataka have also been taken under consideration. The plant capacities would be from 330 kilowatt and above, depending on the needs and location of the villages. USAID will contribute up to $0.6 million to the programme, while GE and its worldwide network of experts and partners will invest up to $2.7 million in direct and indirect funding. GE’s Jenbacher engines operate on a variety of alternative or specialty fuels including biogas, crop residue, municipal solid waste, landfill, coal mine methane and industrial waste gases. The units feature advanced emissions and engine control technology that allow for the cleaner combustion of biomass for power production.

Coal

The government has planned to delay the introduction of amendment Bill to allow private players in coal mining in the face of stiff opposition from trade unions and left parties. Instead, it has plans to introduce another Bill in parliament permitting competitive bidding for captive coal mines and sale of surplus coal from such blocks as part of its efforts to reform the sector.

Aviation

The government has plans to introduce user charges at airports to raise funds to help finance its ambitious Rs 40,000-crore modernisation plan for airports across the country. As per the proposal, every international passenger will be taxed Rs 500 for every trip and domestic passengers Rs 250 per trip. The government has estimated that the passenger cess will raise over Rs 1,000 crore next year.

INFLATION

The annual point-to-point inflation rate based on wholesale price index (WPI) has gone down to 3.96 per cent for the week ended March 25, 2006 from 4.06 per cent during the previous week. The inflation rate was at 5.10 per cent in the corresponding week last year.

The WPI in the week under review has declined by 0.2 per cent to 197 from 197.4 in the previous week (Base: 1993-94=100). The index of primary articles’ group (weight 22.02 per cent) has risen considerably by 0.6 per cent to 193.1 from the previous week’s level of 192, due to an increase of 0.8 per cent and 0.1 per cent in the price index of food articles and non-food articles, respectively.  The index of ‘food articles’ has increased to 195.3 from 193.8 in the previous week, mainly due to an increase in the prices of condiments and spices, moong, fish-inland, fruits and vegetables, urad, mutton and wheat. Similarly, the index of non-food articles has risen marginally to 174.7 from 174.6 in the earlier week, due to an increase in the prices of mesta, rape and mustard seed and safflower. The index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) has remained unchanged at the previous weeks’ index at 316.3. The index of ‘manufactured products’ group constituting the maximum of 63.7 per cent of total weight, has declined considerably by 0.6 per cent to 171.7 from the previous week’s level of 172.8. The major groups, which contributed to this decline, were the food products, ‘leather and leather products’ and base metals.  

The latest final index of WPI for the week ended January 28, 2006 has been revised downwards; as a result both, the absolute index and the implied inflation rate stood at 195.9 and 4.04 per cent as against their provisional levels of 196.4 and 4.30 per cent, respectively.

The average rate of inflation in the year 2005-06 has stood at 4.5 per cent. Similarly, the point-to-point rate of inflation has stood at 4 per cent, a percentage point lower than the estimated rate of 5 per cent in the Economic Survey 2005-06.

BANKING

Banks have started levying annual charges on automated teller machines (ATM) cum debit cards ranging from Rs 50 to Rs 500. Bankers are saying this is a small price customers have to pay for all the convenience they enjoy. The banking sector will generate revenue of over Rs 400 crore from this charge annually. State Bank of India (SBI) the country’s largest bank and the largest issuer of debit cards with a card base of 20 million is the latest to join the list levying this charge. SBI is charging Rs 50 per card per annum. This means, SBI will earn Rs 100 crore under this head. While private sector banks such as ICICI Bank, HDFC Bank charge debit cardholders an annual fee of Rs 100, customers of multinational banks such as Standard Chartered and HSBC will be shelling out nearly Rs 150-200 annually. ICICI Bank links the annual fee on its debit card to the average balance maintained by its account holders. For instance, the bank does not charge its corporate salary customers or high-networth individuals for debit cards.

Saraswat Co-operative Bank has completed the merger of Maratha Mandir Co-operative Bank (MMCB) with itself. This is a major merger in the co-operative banking sector in the recent past. MMCB has deposits worth Rs 180 crore and loan assets worth Rs 110 crore, with a branch network of 11 branches and one extension counter. Saraswat Bank has absorbed MMCB’s 242 employees.

Over 200,000 employees of the country’s largest bank State Bank of India (SBI) has began an indefinite strike, demanding revision in their pension package. The strike has affected India ’s payment system, as well the money market and foreign exchange market as SBI accounts for over 20 per cent of the banking industry.  Around 100 million customers of SBI were put to inconvenience by the strike. The strike has also affected the government’s revenue collection and payment of salaries to employees of companies having salary accounts with the bank.

PUBLIC FINANCE

The Gujarat government has decided to remove value added tax (VAT) from export-oriented agricultural products. The minister of state for finance is likely to issue notification soon regarding it. The traders had protested against VAT  implementation.

ASSOCHAM has urged state governments of Tamil Nadu and Uttar Pradesh to join the value added tax (VAT)  regime  in the current fiscal year and thus enhance the revenues.

The union government is firming up tax defaulters’ list on the basis of annual information returns  (AIR) data on high spenders. The income tax (I-T) department is engaged in scanning the database. It is said  to have identified non-filers of tax returns. Initially, the I-T authorities had asked the individuals to reveal their sources of income, produce their tax returns and quote the PAN. 

The Municipal budget 2006-07 put forth by municipal corporation of greater Mumbai expects revenue income of Rs 6,822 crore, capital income of Rs 3,432 crore whereas revenue expenditure of Rs 6,296 crore and capital expenditure of Rs 3,929 crore.

FINANCIAL  MARKET

Capital Markets

Primary Market

JRG Securities Limited will be tapping the market with its public issue of 36 lakh equity shares at a price of Rs 40 per share for an amount aggregating Rs 1450 lakh. The issue opens on April 17 and closes on April 21.

Secondary Market

During the week under review, the market sentiments were firm except for the profit booking on April 7, which pulled the sensex off its high levels. The BSE sensex surged by 309.48 points or 2.74 per cent over its previous week’s close, at 11589.44 points and the broader S&P CNX Nifty index also gained 52.25 points or 1.54 per cent to close at 3454.8 points. The BSE Mid-Cap and Small-Cap index registered a weekly gain of 3.48 per cent and 4.28 per cent, respectively which is above that registered by sensex. Meanwhile, all the sectoral indices closed the week in positive territory; the highest gainer was BSE CG index up by 6.27 per cent at 8683.13 points, followed by BSE METAL and BSE CD at 3.46 per cent and 3.19 per cent, respectively.

The FIIs were net buyers in the equity market during the week (April 3-7), their net investment for the week ending April 7 stood at Rs 969.60 crore with purchases worth Rs 8779.90 crore and sales of Rs 7810.30 crore. While, in the derivatives market for the futures segment they were net seller to the extent of Rs 370.79 crore with purchases worth Rs 1306.66 crore and sales of Rs 1685.45 crore. In the options segment they were net buyers to the tune of Rs 21.05 crore with purchases worth Rs 109.46 crore and sales of Rs 88.41 crore.

Meanwhile, the mutual funds were also net buyers for the week ending April 7 to the extent of Rs 333.09 crore with purchases worth Rs 1890.84 crore and sales of Rs 1557.75 crore.

Derivatives

For the week ending April 7, the total turnover of the NSE’s F&O segment stood at around Rs 148850 crore with daily average turnover of Rs 37213 crore. As usual the stock futures continued to contribute the bulk of the trading at Rs 103349 crore and the index options turnover stood at Rs 32910 crore.

Government Securities Market

Primary Market

The RBI has announced the sale of a new 10-year government paper and sell (re-issue) the 7.50 per cent 2034 for a notified amount of Rs 5,000 crore and Rs 3,000 crore, respectively.

Meanwhile, during the week, under the regular auction, the RBI has mobilised Rs 500 crore through 91-day and 182-day treasury bills each and the cut-off yields for the 91-day and 182-day treasury bills were 5.7776 per cent and 6.1386 per cent, respectively.

The RBI has notified the revised scheme of underwriting commitment and liquidity support for primary dealers (PD); under the revised scheme, PDs will be required to meet underwriting commitment instead of the earlier requirements of bidding commitment and voluntary underwriting. This underwriting commitment will be divided into minimum underwriting commitment (MUC) and additional competitive underwriting (ACU). MUC of each PDs will be computed to ensure that at least 50 per cent of each issue is mandatorily covered by the aggregate of all MUCs, his in turn would result into each PD underwriting about 3 per cent of the notified amount of each auction as MUC and the remaining portion of the notified amount will be open to ACU.

Meanwhile, in the revised scheme of ways and means advance (WMA) to state governments for 2006-07, the RBI has raised the total normal WMA limit to Rs 9875 crore, against the present limit of Rs 8935 crore. The rate of interest charged on the normal WMA will be repo rate for the period of 1 to 90 days and one per cent above repo rate for the period beyond 90 days.

Secondary Market

During the week, increased government spending towards salary payments amidst lower fund requirements resulted into cash surplus in the market; as a consequence, the call rates eased by around 125 basis points to close the week at 5.55-5.65 per cent as compared to 6.7-6.9 per cent in the previous week. Also, the average daily subscriptions at the reverse repo auction rose to Rs 25,474 crore from Rs 7,084 crore in the previous week, while the amount placed under the repo auctions averaged to Rs 595 crore from Rs 6,338 crore in the previous week.

Bond Market

On April 5, Sebi has notified the revised investment guidelines for FIIs for investing in debt papers including the corporate debt. In the circular, the regulator has said that the Centre has raised the cumulative debt investment limits from $1.75 billion to $2 billion and $0.5 billion to $1.5 billion for FIIs /sub-accounts investment in government securities and corporate debt, respectively and this revision will be applicable with immediate effect. The limits of $2 billion and $1.5 billion will be allocated between two different sets of FIIs registered as 100 per cent debt and the general 70:30. With this, FII’s total investment in debt, including corporate bonds, will raise to $3.50 billion.

Foreign Exchange Market

In the forex market, irrespective of the dollar’s weakness in the overseas market and the strong FII inflows in the domestic market, the sustained RBI intervention through public sector banks pressurized the rupee movement and it depreciated by around 0.16 per cent against dollar to touch Rs 44.69 per dollar from Rs 44.62 in the previous week.  Meanwhile, in the forward premia segment the improved liquidity condition in the market saw the premia rates moving sharply downwards as compared to the previous week.

Commodities Futures Derivatives

During the week, the commodity futures market witnessed a mixed trends in the pulses futures as in the initial part of the week the urad and chana registered impressive gains on account of speculations of chana crop damage in Rajasthan, Madhya Pradesh and Maharashtra that was aroused due to late arrivals, but as the week progressed bearish trends set in with urad and lemon tur registering losses.

On April 3, the Ministry of agriculture has released the second advance estimates of crop production, wherein it has estimated the total foodgrain production at 209.32 million tonne, up 4.71 million tonne from the previous year. In 2004-05, the total foodgrain production stood at 204.62 million tonne. While the production of Kharif foodgrain is estimated at 108.15 million tonne, the production of Rabi foodgrain is estimated at 101.17 million tonne. Wheat production is estimated at 73.06 million tonne and production of maize is estimated at 14.99 million tonne, which is an all time record. Meanwhile, the production of pulses during 2005-06 is estimated at 14.40 million tonne, up by 7.6 per cent as compared to the total production level of 2004-05.

INSURANCE

The Insurance Regulatory and Development Authority (Irda) has asked all insurance companies to put in place by July a proper framework to comply with the Prevention of Money Laundering Act, 2002 (PMLA) which came into force in July last year. As per the PLMA guidelines, insurers are required to submit suspicious transactions immediately to the financial intelligence unit.

CREDIT RATING

Crisil has reaffirmed the ‘AA (SO)’ ratings assigned to the Ahemdabad Municipal Corporation’s Rs 1000 million tax-free bonds (Property Tax)-2002.and its Rs 580 million tax-free bonds (Property and Octroi)-20004. The assigned ratings are based on the corporation's stable financial risk profile and the credit enhancement mechanism provided for each bond by escrow of octroi and/or property tax collections from designated nakas/zones. The credit enhancement mechanism operates through a trustee-administered escrow account. The current reaffirmation is subject to the trustee(s) confirming compliance with all aspects, including legal documentation and stipulated payment mechanism by July 19, 2006 and fully capitalising the sinking fund to provide for the upcoming put/ call option for 2002 Tax-Free Bonds (Property Tax Bonds) by July 30, 2006. The ratings are also based on the corporation's buoyant revenues, healthy revenue surplus levels, strong economic base, and good economic management.

Crisil has assigned ‘AAA/Stable’ rating to National Highways Authority of India’s (NHAI) Rs 80billiob long-term borrowing programme and it has also reaffirmed the ‘AAA/Stable’ rating assigned to NHAI’s Rs 55.93 billion taxable bond programme. The assigned rating is based on NHAI’s strategic importance as the Government of India's nodal agency for the development of the road sector in India , and governments continued financial support to NHAI.

Crisil has assigned a rating of 'AAA/Stable' to ICICI Bank's Rs 40 billion Upper Tier II Bonds issue. The rating on these bonds takes into account the unique features of the instrument including conditional debt servicing characteristic. The agency has factored in, the bank's current and projected capital adequacy levels, and its ability to raise fresh capital (both equity capital and hybrid Tier I capital) into its rating.

Crisil has reaffirmed ‘A/Stable’ rating assigned to Hyderabad Metropolitan Water and Sewerage Board’s Rs 7000 million long-term debt programmes. The reaffirmation is based on the strong support the Board receives from the Government of Andhra Pradesh, and its adequate financial risk profile with high net worth and strong capitalisation ratios.

Crisil has reaffirmed its ‘AA+ (so)’ rating on the bonds issued by the Municipal Corporation of Hyderabad (MCH). The ratings are based on the credit enhancement mechanism provided for the bonds and the corporation's strong financial risk profile. The current reaffirmation is subject to the trustee confirming compliance with all aspects of the credit enhancement mechanism, including legal documentation and stipulated payment mechanism by July 19, 2006. This is in line with the agency’s policy, effective from January 20, 2006, of providing 180 days to the entity (in case of earlier issues rated by Crisil) to comply with the structure.

Icra has upgraded the ‘LBBB’ rating assigned to the Rs 2170 million bond programme (current outstanding of Rs. 1400 million) of Gujarat State Energy Generation Limited to ‘LBBB+’. The rating action reflects the finalisation of the Power Purchase Agreement with erstwhile Gujarat Electricity Board (GEB), expected support from Government of Gujarat and GUVNL in servicing the obligations on the rated bonds and the improving trend in cash collections from its sole customer, the erstwhile GEB.

Icra has assigned ‘LAA’ rating to the proposed Rs 8 billion debenture programme of Kotak Mahindra Prime Limited (formerly Kotak Mahindra Primus Limited). The agency has also reaffirmed the ‘LAA’ rating and the ‘MAA+’ rating, to the debentures and medium term debt programmes of Kotak Mahindra Prime Limited (KMPL). The ratings factor in KMPL’s position as one of the leading players in the car financing business, favourable asset quality, strong risk management skills and comfortable capital adequacy.

Icra has downgraded the rating assigned to the Rs. 150 million Bond programme of Bharat Heavy Plate & Vessels Ltd (BHPV) from ‘LBBB (SO)’ to ‘LBB (SO)’ and placed it on Rating Watch. The rating has been downgraded following a default by the company in redeeming the bonds along with the interest due as on March 27, 2006. The time-bound structured mechanism stipulated the agency required the trustees to invoke the Government of India guarantee in case there was a shortfall in the designated payment account on the specified trigger date. However, the guarantee has not been invoked as per the terms of the structure.

Icra has assigned an ‘LAAA’ rating to the Rs. 50 billion long term debt programme and ‘A1+’ rating to the Rs. 50 billion short term debt programme of Oil India Limited (OIL). The agency has also reaffirmed the A1+ rating earlier assigned to the Rs. 5 billion cp/short term debt programme of OIL. The assigned ratings reflect the company’s strong operating performance as reflected in its competitive cost structure and favorable reserve replacement track record; its currently favourable financial risk profile characterized by robust profitability, low gearing and large liquid investments; the significant sovereign ownership as well as its strategic importance to the country’s energy security.

Fitch Ratings has assigned a short-term rating of ‘F1+( Ind )(SO)’ to the Rs 480 million commercial paper programme of Shyam Telelink Limited (“STL”). The rating is based solely on an unconditional and irrevocable standby facility provided by ICICI Bank (rated ‘BB+’/Stable/‘B’) to a maximum of Rs 480 million, which is the maturity value of the CP programme. The standby facility will remain in force as long as any tranche of the CP issued under this facility is outstanding.

CORPORATE SECTOR

Torrent Pharmaceuticals is planning to set up its wholly-owned subsidiaries in Australia and Mexico to expand its operations in overseas markets with an estimated investment of about $ 100 million. The Australian subsidiary is expected to be operational by July 2006.

Ruchi Soya Industries, a flagship company of Ruchi group, is planning to venture into retail market with an investment of around Rs 2,000 crore in two years.

Two-wheeler major Bajaj Auto has posted 29 per cent higher sales by selling 6.2 lakh units of two and three-wheelers in the last quarter of the financial year 2005-06. Motorcycle sales have gone up by 35 per cent to 5.3 lakh units in the fourth quarter of 2005-06. The total vehicles sold in financial year 2005-06 has stood at 22.72 lakh units against 18.26 lakh in 2004-05. Exports have increased by 27 per cent on year-on-year basis.

Tata Motors has reported 27 per cent rise in total sales including exports of 56,406 units for March 2006, over the same period previous year. Total sales of commercial vehicles in March 2006 in the domestic market have stood at 27,289 units, up by 33.3 per cent.

Almost all carmakers have registered double-digit growth rates for March 2006. Amongst them, market leader, Maruti Udyog has sold 61,141 units of vehicles in March up by 20.6 per cent from the corresponding period previous year, boosted by demand for compact cars like the Alto and Swift. The second largest carmaker, Hyundai Motor India Limited has witnessed a robust growth of 38 per cent in March 2006 by selling 22,524 vehicles.

Cement majors Gujarat Ambuja, ACC have reported healthy increase in production and dispatch level for March 2005. Gujarat Ambuja has recorded a 12 per cent growth in production to 13.33 lakh tonne in March 2006 as compared to last year and dispatches have gone up by 13 per cent to 13.29 lakh tonne. Group company Ambuja Cement Eastern’s production has risen by 16 per cent to 2 lakh tonne and dispatches increased by 23 per cent to 2.18 lakh tonne. ACC has attained a new high of 17.39 lakh tonne in production and 17.46 lakh tonne in dispatches.

Tata Steel has finished this financial year with a record production of hot metal, crude steel and saleable steel. Hot metal production has stood at 5.18 million tonne, crude steel at 4.73 million tonne and saleable steel at 4.52 million tonne in 2005-06, an increase of 19 per cent, 15 per cent and 10 per cent, respectively.

Sangam, a leading polyester viscose dyed yarn manufacturer, has secured orders worth Rs 70 crore. The company has received export orders worth Rs 30 crore from countries such as Egypt , Poland and the UK and order worth Rs 40 crore came from large domestic manufacturers.

Larsen and Toubro has secured its first annuity based road project valued at Rs 550

crore from the National Highway Authority of India. The project involves four laning of the 76-kilometre Palanpur and Swaroopgunj stretch located on the East-West Corridor of NH-14, linking Gujarat and Rajasthan. The company has also secured an order valued Rs 368 crore from a major power generation company in China for supply of critical gasification equipment. The company will supply three sets of gasification equipments to Datang International Power Generation Company.

Genus Overseas Electronics, a producer of single-phase multi-function electronic energy meter, has secured Rs 117.65 crore order from West Bengal State Electricity Board for agri metering.

Bhagyanagar Metal has secured the tender for construction of an integrated township project at Vepagunta in Visakapatnam on 52 acres for Rs 384 crore.

India ’s sixth largest software company, Patni Computer Services has secured $ 50 million HR outsourcing contract from Mercer Consulting spread over a period of two years. 

Celebrity Fashions has acquired an export oriented unit of the Chennai based Ambattur Clothing’s Limited by signing a Memorandum of Understanding.

Sasken Communication has acquired Chennai based Integrated Soft Tech Solutions for $ 1.45 million.

Domestic copper and zinc producers including Hindustan Copper Limited and Hindustan Zinc Limited have raised their basic selling prices up to 7 per cent from April 1,2006. Other producers like Birla Copper and Sterlite Industries and Binani Zinc have also revised basic selling prices.

EXTERNAL SECTOR

India ’s foreign exchange reserves are set to touch $150 billion mark in 2005-06. At this level, the reserves are significantly higher than country’s external debt, which, at the end of December 2005 was to the tune of $119.2 billion. The reserves are also enough to finance imports for 14 months.

India ’s current account deficit has narrowed to $3.85 billion in October-December 2005 quarter from $5.44 billion a year ago. This improvement has been on account of higher net invisible surplus of $8.17 billion against $6.29 billion a year ago. The invisible receipts have grown by 31.3 per cent. The spurt in remittances by Indian’s residing abroad could be possibly due to plough ing back of a part of IMD redemption proceeds.

India ’s external debt has declined by $5 billion by end of December 2005. The 4 per cent decline has been brought about by a drop in external commercial borrowings, reflecting IMD redemption of $5.5 billion in December.

The government has scrapped the target plus incentive scheme for exporters from the financial year 2006-07. The scheme announced during 2004-05, under the foreign trade policy, expired on 31^st March 2006.

According to provisional trade data released by the commerce and industry ministry today, exports grew by nearly 25 per cent over the previous year’s $80.67 billion. Imports stood at $140 billion, 31.52 per cent higher than the previous year’s imports of $106.63 billion. India 's merchandise exports of $101 billion in 2005-06 have come on the back of a huge increase in imports which caused trade deficit to touch $40 billion during the fiscal, compared with $26 billion a year ago. The government had fixed an export target of $92 billion for the fiscal, an increase of 16 per cent over the previous year

The huge increase in trade deficit was primarily on account of a spurt in oil prices. Oil imports in value terms during the 12-month period increased by nearly 47 per cent to $43.84 billion compared with $29.85 billion in the corresponding period of the previous year. Non oil imports during 2005-06 increased by over 25 per cent to $96.39 billion against $ 76.77 billion in 2004-05.

Exports of merchandise from India have grown several-fold in the last few years managing to cross the $100-billion mark during 2005-06. However, a closer look at India ’s export basket and major markets shows that not much diversification has taken place in either over the years. Our export basket mainly comprises gems and jewellery, petroleum and related products, ready made garments, machinery and instruments, pharmaceuticals, chemicals, cotton yarn, transport equipment, iron ore & primary and semi-finished iron & steel and electronic goods. Our markets, too, have remained more or less same over the years. True, that China is threatening to replace the US as our biggest bilateral partner, the top markets for India including the US , China , the UAE and the EU remains much the same

India 's oil import bill has shot up to $40 billion during the first 11 months of 2005-06 on import of 90.34 million tonnes of crude and 10.63 million tonnes of petroleum products. While the country had an import bill of $34.95 billion on crude, it spent $5.29 billion on importing petroleum products in April-February 2005-06. According to data available with the petroleum ministry, the country has exported 19.51 million tonnes of petroleum products worth $9.55 billion in the same period. With this, India ’s net import bill has stood at $30.69 billion, crossing the $22.94 billion bill for the previous fiscal. During April-February 2005-06, public sector oil firms have imported 62.52 million tonnes of crude oil for $25.06 billion while private sector Reliance Industries has imported 27.81 million tonnes of crude for $9.89 billion. PSUs have imported 4.87 million tonnes of products, with cooking gas having the largest share in the import. About 2.32 million tonnes of petroleum gas has been imported for $1.25 billion.

On 7^th of April, the Commerce Minister announced the Annual Supplement to trade policy. The Annual Supplement 2006 introduces a number of measures for identifying and nurturing special focus areas which would generate additional employment opportunities particularly in semi urban and rural areas. Measures have also been introduced for further simplifying procedures and bringing down transaction costs. These measures broadly fall within the framework provided by the five year Foreign Trade Policy, and strive to achieve the twin objectives of doubling India’s share of global merchandise trade by 2009 over its 2004 level, and in the process, enhancing employment opportunities substantially. The main features of the policy are spelt out below:

Export growth target of 20 per cent or $120 billion is set for the current financial year, that is 2006-07 with employment for at least 2 million people.

The twin schemes of Focus Product and Focus Market are being introduced to (a) promote export of products having large employment potential and (b) penetration of strategic markets by Indian products, especially markets in which our exports are comparatively low.

Focus Product Scheme: provides incentives to export of products which have high employment potential in rural and semi urban areas. The Scheme allows duty credit facility at 2.5 per cent of the FOB value of exports to fifty percent of the export turnover of notified products such as value added fish and leather products, stationery items, fireworks, sports goods, handloom products bearing handloom mark and handicraft items.          

Focus Market Scheme 5 Scheme aims at offsetting the high freight cost and other disabilities faced in accessing select international markets. The initiative will enhance India ’s export competitiveness in these regions. The Scheme allows duty credit facility at 2.5 per ent of the FOB value of exports of all products to the notified countries.

Keeping in view the objective of Foreign Trade Policy to promote employment generation in rural and semi urban areas, it has been decided to incentivise the export of village and cottage industry products by awarding a duty free scrip at 5 per cent of FOB value of exports under the expanded Vishesh Krishi Upaj Yojana, which has been renamed as Vishesh Krishi and Gram Udyog Yojana.

In order to tap India ’s potential to become Gems and Jewellery hub because of the tradition of craftsmanship, enterprise and availability of low cost manpower, the supplement has introduced a series of measures, which include:   

Reduction of value added norm from 7 per cent to 4.5 per cent to boost export of plain gold/platinum/silver jewellery, articles and ornaments and enhance their international competitiveness.  

Import of precious metal scrap and used jewellery for certain purposes, export of jewellery on consignment basis and import of cut and polished precious and semi-precious stones for treatment has been allowed. Norms for re-import of rejected precious metal jewellery have also been changed.         

Allowing import of precious metal scrap and used jewellery for utilising spare capacities in melting, refining and jewellery making. Such import, however, will not be allowed through hand baggage.        

Re-import of rejected precious metal jewellery will now only be subject to refund of duty exemption benefits on inputs only and not the duty on jewellery as was being done earlier.

India is fast emerging as an important centre for sourcing auto components. Keeping this in view, provision to allow import of new vehicles by auto component manufacturers for R & D purposes without homologation is being introduced. However, as the facility is for promoting R&D in the sector, the imported vehicle cannot be registered under the Motor Vehicle Rules in the country and will not be allowed to ply on Indian roads.

Export production requires use of many inputs in small quantities as per laid down standard input output norms. Even though such inputs are allowed for import without payment of customs duty under Advance Licensing Scheme, exporters generally do not import such items because of lack of economies of scale and are forced to source them locally at a higher price. To address this issue, Advance Licensing scheme (which allows imports before exports) and Duty Free Replenishment Certificate (which allows transferability of import entitlements) have been clubbed to evolve a new scheme named as Duty Free Import Authorisation Scheme. Under the new scheme the Duty Free Import Authorisation will be issued with actual user condition till export obligation is fulfilled. Imports made under this authorisation will be exempt from payment of basic custom duty, additional customs duty, education cess, antidumping duty and safeguard duty, if any. Duty Free Replenishment Scheme shall be available only for the exports effected upto 30.4.06 under the scheme.

SOCIAL SECTOR

Health Insurance Scheme

According to the Parliamentary Committee under Public Undertakings, the Health Insurance Scheme (HIS) launched by the government in 2003 in order to provide health insurance facilities to the below poverty line people, has benefited only 2 lakh families against the targeted 10 lakh in the past two years in the first phase. Under the scheme, the public and private sector insurance companies covered 65,718 families in 2004-05 and 68,296 families in 2005-06 all-over India .   The Committee has asked the government to make it mandatory for public and private insurance firms to fix certain minimum percentage of their total business to be implemented in rural health insurance portfolio, apart from fixing insurance targets for them. It further pointed out that the centre and the state governments should provide adequate budgetary support for constructing one or two hospitals in each district to treat major diseases.

TELECOM

The department of telecom (DoT) has released new guidelines regarding the spectrum limit. As per the revised guidelines, the limit for the spectrum usage has been increased for GSM and CDMA operators which they can claim on the basis of their subscriber base. The move comes as a major boost to the mobile industry, which is adding as many as 5 million subscribers per month. While the total spectrum was capped at 10 Mhz for GSM and 5 Mhz for CDMA players, it has now been raised to 15 Mhz for GSM and 7.5 Mhz for CDMA for 21 lakh subscribers each. According to new criteria, a GSM operator will get spectrum beyond 10 Mhz in two tranches – from 10 Mhz to 12.4 Mhz (when it crosses 10 lakh subscribers) and 12.4 Mhz to 15 Mhz (when it crosses 16 lakh subscribers). The CDMA operators will get beyond 5 Mhz to 6.25 Mhz and then to 7.25 Mhz. The new criterion comes into effect immediately. It has, however, not taken into account the demand of CDMA operators that equal spectrum be allotted to GSM and CDMA operators for the same number of subscribers.

The total mobile subscriber base, including GSM and CDMA touched 89.31 million in March 2006 as against 84.88 million in the previous month registering an increase of 5.2 per cent. The growth, however, is slightly slower than 5.3 per cent recorded in February, over January.

Hewlett-Packard (HP) is setting up a lab at the Institute of International Technology (IIIT-B) campus to undertake technology research to serve the needs of telecom service providers in the 3G space. This will be the first lab in India that will facilitate students from IIT-B to undertake projects on HP’s IMS network architecture built on the HP OpenCall software platform.

*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project.

LIST OF WEEKLY THEMES

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